The Exclusive Investment Playground: Cracking Open Private Equity

On a recent Level Up Podcast episode, co-host Addison Wiggin posed a provocative question to Certified Financial Planner Preston Zapffe:

Should 401(k) funds be allowed to invest in private equity?

The discussion tapped into a deeper tension in American finance—between access and exclusivity. Preston sees potential for expanding opportunity. Addison, however, voiced sharp concerns: private equity, he argues, is simply not built for average retirement savers.

Their conversation inspired a bigger question: What is private equity, really—and why is it still reserved for the elite?

What Is Private Equity?

Private equity (PE) refers to money invested in private companies—those not listed on the stock market, and thus not available for the public to invest in. These investments are made through pooled funds raised by PE firms, most often from large institutions or wealthy individuals.

PE firms use this money to buy private issue stock or issue loans (debt), for the purpose of restructuring and eventually selling the companies, aiming for large profits in the process.

Most of this occurs behind closed-door boardrooms with little fanfare or ticker tape.

Benefits of Staying Private vs Going Public

Not every business wants to go public—and there’s good reason for that. In fact, an increasing number of successful companies are choosing to remain private for longer—or indefinitely.

Here’s why:

• Fewer Regulations – Public companies must report earnings, disclose financials, and operate under intense scrutiny. Private firms face far fewer requirements.
• Long-Term Thinking – Private owners aren’t beholden to short-term shareholder demands. They can make bold, or patient moves that might spook public investors.
• Tighter Control – Founders and PE firms maintain decision-making authority without interference from thousands of shareholders.
• Stability Over Sentiment – Public markets are volatile. Private firms avoid the rollercoaster of stock price swings and media pressure.

Why That Limits Access

Here’s the consequence: If a company is private, you can’t just buy a piece of it as you can with publicly traded companies. There’s no “Add to Cart” button for stock in private firms. Ownership is restricted to “accredited investors”—those making $200,000+ a year or with over $1 million in assets (excluding their home).

This means:

• Everyday investors are locked out.
• 401(k) accounts can’t invest in these businesses.
• Wealth building becomes a gated process, where opportunity is reserved for those who already have significant wealth.

Why Only the Wealthy (and Big Institutions) Get In

Private equity firms don’t just prefer large investors—they’re structured around them. Here’s why:

• High Minimum Investments – Most PE funds require buy-ins of $250,000 to several million dollars.
• Long Lock-Up Periods – Capital is typically tied up for 5–10 years, which only long-term, deep-pocketed investors can tolerate.
• Regulatory Barriers – The SEC’s accredited investor rules are designed to shield the general public from complex, high-risk investments.
• Operational Efficiency – PE firms want a few large checks, not hundreds of small ones. Institutions like pension funds and endowments fit this model perfectly.

Bottom line: Private equity was never built for individuals. It was designed for financial giants with capital, patience, and power.

Should 401(k)s Be Allowed In?

That’s the debate Preston and Addison explored. Some asset managers are pushing to allow private equity investments inside retirement plans. Advocates say:

• It could improve diversification
• Offer higher potential returns
• Democratize access to sophisticated investments

But Addison Wiggin strongly disagrees.

“It’s not just about access,” he warns, “it’s about suitability. Retirement savings should be transparent, low-cost, and stable—not exposed to opaque deals and unpredictable lockups.”

Private equity investments can tie up funds for years, charge complex fees, and provide little visibility into performance. That’s a high bar for retirement savers who need clarity and liquidity.

Why It Matters

The truth is, private equity is where a lot of real money moves—and where much of the financial system’s highest returns have historically come from. But if access remains restricted, that growth fuels wealth inequality instead of financial inclusion.

The push to bring private equity into the mainstream isn’t just about policy—it’s about redefining who gets to own and benefit from the largest business successes.

Final Thought

At Dealing With Debt, we believe financial literacy means understanding both the systemic challenges—and the doors that remain closed. Whether you’re new to investing or eyeing long-term goals, we’re here to help you understand the game, learn who are the players, and help you get on the field—one market at a time.